There is a beauty to randomness. Trivial things, like card games, dice, and coin flips, can equalize against human will and greed. Chance becomes the arbitrator of life's important decisions, like: "Who goes first?, or, "Now it's your turn to lose all your life savings." The analog nature of reality has kept these games simple for most of history. Even so, sometimes these simple games scale up to whole societies, and determine the fate of billions of dollars.
But in the last few decades, computers have expanded what we can do with probability. Programs can be designed to generate insanely large fields of numbers, and manage chance in precise ways.
These systems can be super-complex and hard to understand.
The perfect example is Bitcoin.
It's understanding is foggy to most (including me), but at it's core is a game of applied mathematics. Despite the complexity of these games, they might have a huge effect on society. Their application goes beyond gambling and jackpots. The nature of these games are simple. They promote fairness. It's possible for this kind of technology to be the foundation of a new digital democracy. Instead of a republic that elects falliable officials for multi-year terms, a machine could randomly delegate temporary decision-making authority among a pool of qualified participants.
Let's start by demystifying Bitcoin. It's the most trending random number generator on Twitter, but it's also just the first prototype of what's possible. We'll finish by looking at cutting edge network designs, some of which are already worth billions of dollars, and how they might change how groups make decisions.
Bitcoin is a Random Number Generator
There are lots of confusing ways to explain Bitcoin. Let's keep it simple. Bitcoin is a random number generator. Yes, it's also a computer network, where each node stores an identical and encrypted ledger of ALL Bitcoin transactions since 2008 (yikes). But behind that is a wacky kind of cypher-punk lottery game.
Every 10 minutes, all of the pending transactions on the network get grouped into a "block." When each block is formed, a 256-character secret binary string is generated. It looks something like this:
So here's what mining is: A person connects their computer to the network and tries to guess the number. Since it's an absurdly large number, the odds of anyone guessing it on a given try are 1 in 115 quattuorviginitillion. But when the miners find the block, they get rewarded. It's an absurd game, but it's worth playing.
Currently, there is around $28 million per day to be gained in block rewards. Millions of miners around the world dedicate insane amount of computation to guess the number as fast as they can. A mining company recently went public for $50 billion, selling "application-specific" graphics cards, built and optimized for the sole purpose of number-crunchin'.
Aka: Serious infrastructure is being built for an economy to be run on a hive-mind lotto machine.
When someone guesses the number, they broadcast the answer to the entire network. This is where it differs from Mega Millions. There is no jackpot. The person who solves the puzzle doesn't keep the reward for themselves. Bitcoin is a swarm intelligence. When the reward is found, it is shared. Everyone gets rewarded in proportion to the amount of guess-power they contributed. In the act of doing so, each machine syncs an identical batch of encrypted transactions.
Probability & Democracy
- Many ways to design the game, Bitcoin has flaws (electricity, and centralization over time) - 1,000s of "altcoins" - some are mere clones of Bitcoin, while others have dramatically different architectures - yet all have random number generation, chance, probability at their core.
- Cardano, proof of stake, no mining, 50 randomly selected participants per block, possible for a truly decentralized network that can exist through time (unlike BTC)
- In addition to rewarding validaters, money goes into a decentralized treasury each block - could accrue huge sums of money over time - this pool could be used for a budget that can be democratically allocated over time
- Developers can submit proposals to improve the protocol, and those who hold Cardano having voting power in proportion to the amount of money they have "staked" in the network.
- Lack of voting power has caused hard-forks in both Bitcoin and Ethereum, a kind of civil war when consensus can't be reached - over 10 version of Bitcoin
- Many different ways to design the voting mechanism within a decentralized network. Instead of money as the root of power, could design a metric-based way to quantify credibility, skills, knowledge, bias, etc.
- Potential for a new governance paradigm without terms. Remove campaigning and financing from the equation. The most qualified people are discouraged from participating in democracy because of the resources/time required, and the games behind power.
- A piece of software that breaks down governance into a system of hundreds of types of decisions that need to be made - quantifies the type of metrics a person needs to be qualified to make those decisions. Instead of electing terms, probability will select a person when the need arises, and it will financially incentivize that person to step in for a short-period of time.
This is how digital money is minted. A game of mathematics and probability is played every 10 minutes. At the end of each game the blockchain grows by one block.
In order to play the game, you need to sync up the history of
All of the transactions are
Those who have the resources to contribute to the game get rewarded, and those
And those who
This is how digital money is being minted without a centralized being able to access the ledger or control the supply.
Millions of random people are selfishly motivated to play an arbitrary game of math that underpins a new economy.
So the value behind Bitcoin is a type of
Millions of independent machines are financially incentivized to maintain an accurate source of all transactions.
So the inherent value in Bitcoin lies in the network of computers that work together to agree upon a correct version of the ledger (the history of ALL transactions that have ever occurred on the Bitcoin network). Every 10 minutes, all of the pending transactions on the Bitcoin network are grouped into a "block." Each block has a unique message, which is then put through a hash function. This hash function outputs a unique and encrypted 256-character binary string that is associated with that block. It could look something like this:
So the inherent value behind Bitcoin is an arbitrary game of mathematics that financially incentivizes a diverse set of people from around the world to continuously play.
A "51% attack" on the Bitcoin network would require more corrupt people to play the game than honest people. This would require the coordination of so much computation power, that it would be more expensive than the actual value within the network.